White South Sea Pearl Wholesale Industry and Market Analysis

Now, let’s look at the WHITE South Sea Pearl Wholesale situation: (Pearls farmed in the Pinctada maxima oyster in Australia, Indonesia, the Philippines and Myanmar).

History tends to repeats itself. When an industry is new and successful, it can catch fire. The produce is scarce and prices are high. Understandably, many are jumping on the lucrative bandwagon… till, at one given moment, the saturation point is reached (read over-production). It happened to Japan in 1966/1967, and to Tahiti most recently. And it is happening to the white South Sea Pearl Wholesale as we speak. Tides have turned. (Info details: Pearl Wholesale).

That it coincides with the present global recession makes the problem more pronounced and has a very serious impact on the industry. One can also put it into other words: It was the sudden global recession that finally brought the pot to over-boil. This “double-punch” is now rocking the industry at its foundation, as it has made heavy capital investments during recent years. The interesting history of white South Sea Pearl Wholesale goes way back to the pre-war time, when Japanese pioneers farmed them in Indonesia, and sold them under their sponsor’s name as “Mitsubishi Pearls”. The pre-war peak in production was reached in 1936, with a quantity of 5 kan (18.75 kilos). One must give due credit to those who took up South Sea Pearl Wholesale farming after the war. We refer to Mr. Takashima who ventured into Burma in 1954, and to the legendary Mr. Kuribayashi who introduced the cultured pearl industry to Australia in 1956. But the South Sea Pearl Wholesale only moved into the limelight in the early 1980s. We estimate that by 1982/1983, the global annual production volume had reached 100 kan (375 kilos) for the first time, at an estimated price of yen 60,000 per momme (or US$ 240 at the then prevailing rate of yen 250/dollar). (Info details: Pearl Wholesale)

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For 2009, we estimate the global South Sea Pearl Wholesale production to reach 3,350 kan (12.4 tonnes), at an average price of yen 4,870 per momme (or US$ 51 at today’s exchange rate). In terms of weight, this represents a 33-fold increase in the relatively short span of 27 years.

As we speak, the industry is going through major adjustments with the aim to correct the present imbalance between supply and demand, to achieve price-stability and re-gain profitability. A considerable reduction in production could well coincide with the global economy coming out of recession. This will be most welcome news. But it will not happen tomorrow.

We are not in an industry where production units can be shut down almost instantly, as it is happening now, e.g. in the car industry. The lead-time in our industry is a few years. This will be a very crucial time. We’ll witness a major shakeout on all levels. Australia, the leading producer, has the best-regulated pearling and Pearl Wholesale industry, which makes it also the most transparent among all producer nations.

At present, total quota units in WA number 907,000 oysters (557,000 wild stock and 350,000 hatchery options). Total seeding rights this year are set at 962,700 oysters. Gone are the days where these seeding rights were utilised to their full capacity. Gone are the days when a 15,000 quota was practically the equivalent to a “license to print money”. Today, several farms, prosperous just a few years ago, are no longer operating per se. Comes seeding time this July and August, we’ll witness that all the farms in WA, without exception, are seeding less oysters.

We estimate that the total number of oysters seeded will reach 450,000 at most (our lowend estimate is 350,000). This is less than half the allowable quota, and much less than seeded during past years. This is extremely significant, but due to the long lead time, the results will only be felt in a couple of years, at the earliest.

Indonesia’s SSP industry is facing similar/same problems, and for many, it has now become a survival game. But there, the situation is less transparent. One Herculean producer, the Nusantara Pearl Group (known to market through the Concorde Auctions), is estimated to control roughly 70 to 75 percent of total Indonesian production. It is only natural that all eyes are now focusing on them, hoping to get a glimpse of how they react in today’s trying times. (One exception to the rule in Indonesia is Atlas South Sea Pearl. Atlas is extremely well managed and very efficient. The quality of their pearls is correspondingly high and cannot be compared with the Indonesian average. Atlas enjoys a very high reputation in our trade and, being publicly quoted, is the only Indonesian producer to show transparency. They deserve special mention). (Reference: Pearl Wholesale)

We don’t have too much reliable information when it comes to the Philippines but believe that they are no exception. To stay in the game, they too have to restructure. Some farms have openly admitted that their 2009 seedings will be down by 30 to 35 percent. Myanmar lives in the past, and overseas investors who entered pearl farming contracts with the government, are now realising that it is a very lopsided deal in favour of the Burmese who don’t share any risk. These overseas investors acted in good faith, some of them made huge capital investments. For them, it has become almost impossible to keep the head above the water, especially when at least 1/4 of their crops is taken away by the government… well, time will tell.

Some thoughts:

FIRST:

While writing this speech, I was kind of warned by some very prominent pearl traders,NOT to give a bleak picture, NOT to show certain figures, and NOT to disclose recentprice-developments.While I have partially tried to adhere to this request, I firmly believe that we must not beafraid to confront the reality. I think it is unfair and unethical to hide facts about productionand price-developments, etc. Most of our customers invest, and deserve to know wherethey stand.Confidence is a key-issue. The more open and transparent we are, the more we gaincredibility, which our industry often lacks!Also, we must be aware that in certain countries, misrepresentation to the buyer is againstthe law.(Reference: Pearl Wholesale)

SECOND:

Any industry has teething problems, goes through stages of “trial and error” and often livesin a “world of uncertainty”. As the industry matures, adjustments are made.Look at the American Automobile Industry. When it started just before the turn of the lastcentury, many jumped on the bandwagon. By 1909, there were a total of 557 registered automobile producers in the USA. In the span of a hundred years, there were over 1,000many merged. Today, we are down to just three (all in the process of serious restructuring).But these three are now producing much more cars than the 1,000manufacturers had ever produced together. We observe the same with the airline industry. Today’s fewer airline companies are transporting much more passengers than a much larger number of airline companiestransported twenty or thirty years ago.

Don’t we also observe a similar pattern developing in our small pearling industry? Don’t we have now in Australia a situation where several farms, over time, were put into just two baskets (the Paspaley Group and the Autore Group), whereas previously, they were independently working and marketing? During the past years, the number of pearl farms in Indonesia and Tahiti (and possibly the Philippines) has been reduced. Yet, production volumes have multiplied. Yes, we are presently going through a “restructuring phase”, with mergers and acquisitions and, ultimately, some failures. (Reference: Pearl Wholesale)

THIRD:

No doubt, our industry will not only survive, it will thrive again in the not too distant future. Major re-adjustments will take some time, and for many, it’s a very painful process. But most will come out of this, and blossom! At present, the cake served to overfed and cash-strapped consumers is too large to be digested. But as consumers are developing appetite again, they will suddenly wake up, and be confronted with a much smaller cake, and the race to get a piece of it will start again! Be ready and don’t miss out. It’s the early birds that are catching the worms!

Article source: Andy Müller, Kobe/Japan, as presented at the European Gemmological Symposium in Berne, Switzerland on June 5th, 2009 – South Sea Pearl Wholesale

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